Why Target Sell-Through Rates Are a Massive Mistake

So firstly, why does the idea of a sell-through rate keep coming up again and again? And one reason is that in many businesses, the sell-through rate contributes directly to the profitability.

And in particular, in other industries that focus on your management.

So if we take the airline industry, for example, they usually fly somewhere between 80 and 85% full.

If they are less than, say, 65% full, they are likely to be unprofitable.

And so I've talked in other videos about the differences between yield management in the airlines and in digital advertising.

But in this case, the difference is critical because it leads to very different ways of thinking about the businesses.

The airlines have significant both fixed and variable costs.

whereas digital publishers have fixed costs associated with the people and with the infrastructure but the incremental cost of serving an extra thousand ads is tiny so the sell-through rate is far less relevant in digital advertising But if you have a company who has hired a CFO who is new to the digital advertising industry, it may be one of the first questions that they ask and one of the first things that they want to get into.

Also, for a company running a retail or commerce media network, they may find that they get asked a lot about the sell-through if that concept or the load rate is very important in the mainline business.

I've talked in other videos about the concept of a Goldilocks metric.

And these are metrics where you don't want them to be as high as possible or as low as possible.

You just want them to be within an acceptable range and you want to monitor when they leave that range.

And I'm going to link to the video right here, but one of the takeaways from that video is that these types of metrics, there's a lot of good information to be gleaned from monitoring the levels and the trends, but you definitely shouldn't target on them.